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We’re less than four weeks away from the 2022 tax deadline, April 18, 2023. This is when the IRS expects most people to have their returns filed. And those who don’t could find themselves in serious hot water – or not. Here’s what you need to know about what happens if you don’t file your taxes on time.
If any of the following things apply to you, you may not experience any problems if you fail to file your return on time.
You live in an area hit by a federally declared disaster
The federal government often extends the tax-filing deadline for those who live in an area hit by a federally declared disaster in order to give people more time to recover and gather all the necessary documentation. The length of the extension can vary, but it’s usually at least a month beyond the standard tax deadline. You can view a list of all tax extensions granted in disaster areas on the IRS’s website.
You filed a tax extension
Individuals always have the option to file a tax extension themselves if they want. This gives you until Oct. 16, 2023, to file your 2022 taxes. To do this, you must fill out an application and submit it to the IRS.
However, you should note that an extension to file your tax return does not grant you an extension to pay any outstanding tax bill you owe. If you expect a refund, you should be fine. But if you owe the IRS and you don’t pay the April deadline, you’ll begin to incur penalties as outlined below.
You don’t have to file your taxes
Not everyone is legally required to file federal taxes. Those with incomes below the standard deduction for their age and tax-filing status don’t have to file a return if they don’t want to. The following table shows how much you can earn before you have to submit a 2022 tax return.
It’s worth noting that just because you don’t have to file a tax return doesn’t mean you shouldn’t. Those who qualify for refundable tax credits, like the Earned Income Tax Credit, can benefit from filing a return even if their annual income was below the thresholds listed in the table above. Doing so could earn you a refund check you can spend on whatever you like.
Or you could face penalties
There are two types of penalties the IRS could charge you with if you fail to file your tax return on time. You could owe one or both.
Failure to File penalty
You could owe this penalty for not filing your return by Apr. 18, 2023, or whatever your extended tax deadline is. This penalty is 5% of the unpaid taxes for each month or part of a month that your return is late. It’s capped at 25% of your unpaid balance.
Failure to Pay penalty
This penalty depends on how long your taxes remain unpaid. You could owe this if you didn’t pay enough in taxes throughout 2022. This penalty is 0.5% of the unpaid taxes for each month or part of a month your taxes go unpaid. It will not exceed 25% of your outstanding balance.
If you owe both
Those who owe both a Failure to File and a Failure to Pay penalty won’t see their monthly penalties exceed 5% of their unpaid tax bill. The total will depend on how much you owe, but it could easily amount to hundreds of dollars.
How to avoid late filing penalties
Whenever possible, you should strive to file your taxes by the tax-filing deadline to avoid penalties and possible facetime with the IRS. Even if you believe you’ll owe more in taxes than you can afford to pay, you should still file your return now.
Doing so will help you avoid the Failure to File penalty, and there are payment plans you can sign up for that will cut your Failure to Pay penalty in half. To do this, you’ll need to set up monthly payments from a linked bank account. This will give you more time to pay what you owe without the IRS knocking at your door.
More of your 2022 tax season questions answered
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